Business Case Analysis for Replacement of NXXXX · OPM 08 Appendix 7 Page 1 Department of the...

OPM 08 Appendix 7

Page 1

Department of the Interior

Agency Name

Business Case Analysis for Replacement of NXXXX

Prepared By: Agency Office

Address Address

Date

NOTE: This template is a guide. Not everything will apply for every aircraft.


Agency Name

Date Page 2

Intentionally Left Blank


Agency Name

Date Page 3

Table of Contents

1 BUSINESS CASE ANALYSIS SUMMARY ............................................................................. 5

1.1 Table: Aircraft Cost with Pilot ............................................................................................ 6

1.2 Graph: Aircraft Available Days, Daily and Annual Costs ................................................. 6

2 INTRODUCTION ...................................................................................................................... 6

2.1 Service Life of the Replacement Aircraft ........................................................................... 7 2.1.1 Aircraft in Service ................................................................................................... 7 2.1.2 Avionics Obsolescence .......................................................................................... 8 2.1.3 Projected Service Life of the Aircraft ...................................................................... 8

3 MISSION REQUIREMENTS .................................................................................................... 8

3.1 Table: Payload and Performance ..................................................................................... 8

3.2 Table: Aircraft Requirements ............................................................................................ 9

4 COST EFFECTIVE ANALYSIS ............................................................................................... 9

4.1 Alternative Aircraft ........................................................................................................... 10 4.1.1 Table: Approved Aircraft and Mission Capability ................................................. 10 4.1.2 Operating and Acquisition Cost ............................................................................ 12 4.1.3 Ownership Alternatives ......................................................................................... 12 4.1.4 Table: Comparison of Size and Speed of Alternate Aircraft ................................. 13 4.1.5 Table: Ranking ..................................................................................................... 13

4.2 Operating and Acquisition Cost ....................................................................................... 14 4.2.1 Table: Operating and Acquisition Cost ................................................................. 14

4.3 Aircraft Ownership Alternatives ....................................................................................... 14 4.3.1 Table: Aircraft Cost Comparison .......................................................................... 15

4.4 Cost Effectiveness ........................................................................................................... 16 4.4.1 Cost Effectiveness ................................................................................................ 16

5 AVIONICS UPGRADE ANYALYSIS ..................................................................................... 17

5.1 Available Retrofit Avionics ............................................................................................... 17

5.2 Competitor B ................................................................................................................... 17

5.3 Installation Downtime ...................................................................................................... 17

5.4 Conclusions ..................................................................................................................... 17

6 TWENTY YEAR BUDGET BASELINE ................................................................................. 17

6.1 Avionics Upgrade costs ................................................................................................... 18

6.2 Operating Financial Assumptions ................................................................................... 18


Agency Name

Date Page 4

6.3 Life Cycle Cost Analysis .................................................................................................. 18

7 SUMMARY SPENDING PROJECT PHASES ....................................................................... 21

7.1 Table: Summary of Spending for Project Phases .......................................................... 21

8 APPENDICES ........................................................................................................................ 22

8.1 NXXXX Registry .............................................................................................................. 22

8.2 Aircraft Procurment Documents ...................................................................................... 22

8.3 AMD Financial Documents .............................................................................................. 22


Agency Name

Date Page 5

1 BUSINESS CASE ANALYSIS SUMMARY

The Agency (Agency Acronym) operates __#_ fleet _________aircraft make/model_______. This aircraft (NXXXX) was acquired for the Agency in ___year____ for approximately $_____

1. The

current blue book value is $______ dollars. NXXXX is based in _location____ at the _____airport____. The aircraft is owned by the Department of the Interior, Aviation Management Directorate

2 (AMD).

The primary use of this aircraft is for support of give mission aircraft is primarily used for. The Agency contracts __#__ vendor ___mission purpose____ aicraft to supplement the fleet aircraft. Contract aircraft are #, make/model, and location of aircraft used in addition to the fleet to support this mission purpose.

Describe why a fleet aircraft has been included in the program, rather than contracting for the service over the years.

Describe what the aircraft is used for during the year. A table would be helpful, by month, and mission for several years, so the number of hours can be seen and charted to document the consistancy of the program over time.

Describe how well the current aircraft has supported the program it has been assigned to, including benefits of the aircraft, and capabilities it may lack, or could be enhanced through the procurement of a new/different aircraft.

Describe other fleet aircraft that the DOI currently operates throughout the US, and why these assets are unable to support this program. Also, are there other Federal assets in the area, and if so, why are they not able to support the current program requirements.

Described how the aircraft are managed, ie: All aircraft are managed to ensure a schedule which meets the specific requirements for the assigned mission. The current fleet structure provides the most cost effective mix to address each mission’s requirement.

The projected service life of NXXXX is approximately XXXX years. To achieve this projected service life equipment upgrade will be required (if necessary) in ____year(s) with an estimated cost of $_______. This upgrade consists of replacing _____ (required in FY ____).

The ___-year life cycle cost for the operation and maintenance of this aircraft is projected to be about $_____.

The fleet aircraft is maintained by the DOI AMD and flown by ____ pilots. This aircraft is operated and maintained in accordance with the civil aircraft standards of FAR Part 91 and the DOI Departmental Manual to mitigate associated risks with these types of operations. The aircraft is anticipated to fly an average of ____ hours per year, which was used to calculate the FY projected cost during its useful life.

The use of DOI owned aircraft for the ______ mission in support of _____ operations, provides substantial savings when compared with accomplishing this mission using alternate means. Other means (if applicable) of performing this mission include ______. The following table describes the other alternatives considered, the advantages and disadvantages, and the risk associated with the identified alternatives. In addition to non-aviation alternatives considered, a cost analysis was performed on the current aircraft compared with other platforms and whether it is more cost effective to use one or more DOI owned and operated aircraft than to use all contractors’ owned/operated aircraft.

Based on the results of the analysis it was determined that:

1 See Appendices 8.2 Aircraft Procurment Documents (if available/applicable)

2 See Appendices 8.1 Aircraft Registration (if applicable)


Agency Name

Date Page 6

- The DOI owned and ____ operated _______ is (not) the most cost effective aircraft and Government ownership is(not) the most cost effective approach to accomplishing the described objectives and mission. The savings gained by using the DOI owned _______ aircraft instead of contractor-owned and operated aircraft is ______ over ___ years. See table 1.1 and graph 1.2

- It is not recommended that the entire aircraft fleet be DOI owned and BLM operated due to FTE justification and aircraft utilization. Fleet aircraft are used to provide smokejumper research and development support during periods when vendor aircraft are not on contract and provides a necessary baseline for flight standards/pilot qualifications while contributing to an environment obtaining better value from vendors.

1.1 Table: _______ Aircraft Cost with Pilot

___ Day Availability

Daily Availability cost

Hourly Annual Cost vs. ___ day Contract

____ hour cost

Fleet ______, ___ based. (FTE included) $ $ $ $

Contract _____ based___. $ $ $ $

Contract _____ based ___. $ $ $ $

1.2 Graph: Aircraft Available Days, Daily and Annual Costs

Annual Cost

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

1 2 3 4 5 6 7 8 9

Year

Co

st Contract ____, based _____

Contract ____, based ____

Fleet ____, based____

2 INTRODUCTION

The DOI owns and the ___ operates ____ fleet ______ aircraft: (#) _________, ____ based; (#) ________, _____ based; (#) _______, ______ based; etc.


Agency Name

Date Page 7

The current fleet supports (agency/DOI) strategic Goals. The _______ is used _________ and is managed to ensure the aircraft is scheduled to meet specific mission requirements/objectives for each flight. Because some aspects of the ______ program have different requirements they require different aerial platforms. The current fleet provides the most effective mix of aircraft (contract and vendor/make and model) that address each program requirement. The ______ is used to _________, and is available for other government agencies use.

The _______ aircraft is designated a ________ aircraft based _______ and is maintained by the AMD while flown by _____ pilots. The aircraft is operated in accordance and maintained with the civil aircraft standards of FAR Part 91and the Departmental Manual to mitigate associated risks with this type of operation and the aircraft primarily _________. The operational experience and forecast flying hour program for the _____ aircraft is _____ hours per year per aircraft. The number of flight hours is projected to remain at the ____ hour level variable on ______.

The current ______ aircraft (do not) serve the _____ well. It is a ____ model that is (not) reliable and (not) well supported. It is also well suited to the mission payload, speed, endurance and range requirements. Any other information about the current aircraft performance and ability to support the program; alterations made; etc.

The _____ aircraft business case analysis document supports the Exhibit 300, establishes the projected 20 year budget, determines overall cost effectiveness of using the DOI-owned and operated aircraft, and estimates the cost for the required equipment upgrade in FY _____ and FY ______.

The ________ aircraft are used to support the following missions:

- ___________. Include if this has been determined to be a governmental function and how it

meets strategic goals.


meets strategic goals





2.1 Service Life of the _________

(#) factors determine the projected service life for the ________:

1 Number of aircraft in service

2 Obsolescence issues (if any) that will decrease the projected service life

3 ______ has a lower/higher than average total time on the airframe. _____ hours Total Time is

significantly lower/higher than the ______ hour average.

2.1.1 Aircraft in Service

Production of the ______ by _______ started in ____ and ended in (is on-going). During this time the following number of aircraft was produced:

- Model xxxx (#)


Agency Name

Date Page 8

- Model xxxx (#)

- Model xxxx (#)

- Total (#)

The ______ has (not) proven to be a good (bad) aircraft because ________ . An analysis of the in-service fleet of these aircraft shows that over __% of the ___ aircraft produced were still in service as of ____. The average age of this fleet is ____ years.

Include as much information about the aircraft, background, future service availability, etc.

This suggests that a ___ year operational life is realistic for the ____. Therefore, an aircraft built in _____ can be expected to be in service until _____.

2.1.2 Component Obsolescence

The only drawback attributable to this aircraft from the point of view of its projected service life is ________. Include any information that would be relevant to upgraded components that will/may be needed in the future.

2.1.3 Projected Service Life of the _________

Based on ______ the remaining useful life of the DOI _______ is believed to be at least ___ more years, assuming ________. This will allow use of the current/replacement aircraft until ________. For the purposes of this analysis _____ is used as the nominal replacement date for this aircraft.

3 MISSION REQUIREMENTS

The mission requirements are discussed in detail in the Requirements Document and are summarized in the following table (Table 3.1 and 3.2).

3.1 Table: Payload and Performance (complete as applicable for each mission) Example:

__________ mission

- Required Seats #

- Equipment rack #

- Total payload # minimum Pounds

- Endurance # Hours

- Maximum

________ mission

- Required Seats #

Aircraft Configuration

Passenger Loading (1) Air stair

Passenger Seating #

- Interior furnishings Standard

Pilot seats #

Jump Door/Cargo Door # inches wide, # inches high min.

Miscellaneous


Agency Name

Date Page 9

Certification Day/Night/Icing/IFR

Avionics Detail

Avionics and Cockpit Displays Detail

Maximum Flight Crew # Pilots

Utilization

_________ Mission _____ Hours

Total per year ______ Hours

3.2 Table: Aircraft Requirements

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

4 COST EFFECTIVE ANALYSIS

Include how the mission is currently being completed


Agency Name

Date Page 10

4.1 Alternative Aircraft

The BLM currently uses _____ owned and _____ contracted _______ aircraft for the _____ mission. There are several other aircraft that can be used for these missions.

4.1.1 Table: Aircraft and Mission Capability These aircraft are shown in the following table

OPM 08 Appendix 7

Page 11

Table 4.1.1 Alternative

Aircraft

Designator Mission Max. T.O.

Empty Max Max. Range Airframe in

production Seating Weight Weight Load Fuel

Nautical miles

Manufacturer & Type

Pilot + (lb) (lb) (lb) (US

gals)

OPM 08 Appendix 7

Page 12

4.1.2 Operating and Acquisition Cost

Acquisition and operations costs have a direct impact on the ability of the users to afford the use of the aircraft. The operation cost per hour was obtained from current fleet rate and contracts

4.1.3 Ownership Alternatives

Table 4.2..1 Cost Comparison

Cost category DOI Contract 1 Contract 2

___ days ___ days ___ days

Fuel $ * $ ** $ **

Flight Support & Oxygen $ * $ ** $ **

Maintenance $ * $ ** $ **

AMD Charge * / included in the contract ** $ $ 0 $ 0

Operations Overhead See Table 2 page 16 $ $ $

Cost of Capital $ $ 0 $ 0

Depreciation $ $ 0 $ 0

Total $ $ $

Total $ $ $

(May need to include more than two options, including own and contract comparisons, depending on how closely ranked the aircraft types are in meeting the mission—Cost information should be comparable from one option to another, ie: all include fuel, all include pilot, FET where applicable, etc.)


Agency Name

Date Page 13

4.1.4 Table: Comparison of Size and Speed of Alternate Aircraft

Item A/C 1 A/C 2

Cabin Height (Feet)

Cabin Width (Feet)

Cabin Length (Feet)

Cabin Volume (Cubic Feet)

Door Height (Feet)

Door Width (Feet)

Baggage Volume Internal (Cubic Feet)

Baggage Volume External (Cubic Feet)

Seats - Executive

Maximum Take-off Weight (lbs)

Maximum Landing Weight (lbs)

Basic Operating Weight w/crew (lbs)

Usable Fuel (lbs)

Payload with Full Fuel (lbs)

Maximum Payload (lbs)

Range - Seats Full (nm)

Maximum Range (nm)

Balance Field Length (feet)

Landing Distance (Factored) (feet)

Rate of Climb - ALL Engines (feet p/min)

Rate of Climb - One Engine Out (feet

p/min)

Max Cruise Speed (ktas)

Normal Cruise Speed (ktas)

Long Range Cruise Speed (ktas)

Service Ceiling at Maximum Weight (feet)

One Engine Inoperative Service Ceiling at

Maximum Weight (feet)

Number of Engines

Engine Model

Engine Manufacturer

4.1.5 Table: Ranking

Scoring (1 low 10 high) A/C 1 A/C 2

- Engines

- Cabin

- Cargo Door

- Pressurization

- Minimum Speed

- Maximum Speed

- Total Score


Agency Name

Date Page 14

Ranking

4.2 Operating and Acquisition Cost

Acquisition and operation costs have a direct impact on the ability of the users to afford the use of the aircraft. The operating cost per hour was obtained from the Aviation Managements Directorate database for ______. The cost of acquisition was obtained from ________. The ______ was based on ___________. The following table compares the variable operating cost per hour (fuel, maintenance parts and labor plus overhaul of engines and other major components) as well as the average cost of acquisition.

4.2.1 Table: Operating and Acquisition Cost

(May need to include more than two options, including own and contract comparisons, depending on how closely ranked the aircraft are in meeting the mission—Cost information should be comparable from one option to another, ie: all include fuel, all include pilot, FET where applicable, etc.)

Aircraft DOI _____ Alternative

Operating Cost/FH $ $

Ranking 1(low) – 5 (High)

# #

Acquisition Cost

- Minimum $ $

- Maximum $ $

- Average $ $

Ranking 1 – 5 # #

Total Score # #

Ranking # #

4.3 Aircraft Ownership Alternatives

The second major area examined ownership and operation of the aircraft verses contract operations. Currently, the fleet aircraft is owned and maintained by the DOI and are operated by the ____. The alternative approach is to have a contractor provide suitably equipped aircraft as well as operate and maintain them.

There are (not) highly qualified contractors available who a) own ______ aircraft equipped for the _____ mission and b) has (not) provided these services currently or in the past. If applicable: Current vendor organizations are _______ of ______. This organization _give history of any contractors or organizations that do/may be able to provide the service.


Agency Name

Date Page 15

4.3.1 Table: Aircraft Cost Comparison

T1 Fuel & Other Fluids

T2

T3 Aircraft Lease or Rental

T4 Landing & Tie-Down Fees (if applicable)

T5 Variable Maintenance & Spares

a Maintenance Labor @ $_____ per hour multiplied by ____ man-hours PFH

b Maintenance Parts

c Maintenance Contracts

d Engine Overhaul, etc…

e Reserves

f Total Variable Maintenance Cost PFH

T6 Total Direct Operating Cost T1 thru T5

T7 Flight Hours as detailed in the Performance Work Statement

T8 Total Direct Operating Cost (line T-6 times Line T-7)

T9 Crew… labor costs

T10 Fixed Maintenance

a Maintenance Labor

b Maintenance Parts

c Maintenance Contracts

T11 Aircraft Lease

T12 Depreciation

T13 Self Insurance

a Hull

b Liability

c Other

c1 - Casualty

c2- Personnel Liability

d Total Self-Insurance

T14 Overhead

T15 Cost of Capital or Finance Expense (30 Year Treasury note@___%)

T16 Total Fixed Operating Annual Cost (lines T-9 thru T-15)

Table 2:AIRCRAFT/AVIATION OPERATIONS & MAINTENANCE COST

Annual Direct Operation Cost Per Flight Hour (PFH)

Annual Fixed Operating Cost

Crew (PFH)… these are travel / per diem costs… not labor costs (Flight

Safety & mission check) $____ by ____= $__ PFH

The assumptions on which this analysis and the conclusions are based are as follows:


Agency Name

Date Page 16

1 Fuel: The cost of fuel is based on the current fuel contract costs ($____ per gallon DOD

Contract rate) and an average fuel consumption of ___ gallons per hour and is included in the

current flight rate.

2 Flight support and oxygen: These costs are included in the annual charge from AMD.

3 Maintenance: Maintenance costs for the aircraft are based on the current maintenance costs

charged from AMD ($____ per FH).

4 Overhead: These costs are based on __% of ___ position devoted to aviation operations (.__

FTE).

5 Cost of capital: This cost recognizes the fact that the government has a substantial amount of

money tied up in these aircraft (about $______). OMB regulations indicate that the cost of this

capital must be calculated when comparing government owned aircraft with contractor owned

aircraft. The current cost of capital is ____% per year (as of _____ and OMB Advisory

Circular A-11, Appendix C). Vendor aircraft do not incur these costs.

6 Depreciation: This cost element recognizes the fact that aircraft depreciate over time. The

formula promulgated by OMB requires depreciating the value of the aircraft ($_____) to 10%

of its value over the expected service life (___ years). This cost is $_____ per year. This is not

included as a cost on the contractor estimate, since the Government is not charged

specifically for this cost by the contractor.

4.4 Cost Effectiveness

This analysis clearly shows that the use of the ______ is the most cost effective means of providing the required services and meet the mission requirements. Use of _____ and _____ operated aircraft saves approximately $____ (See Table 4.5.1) per year compared with _____.

4.4.1 Cost Effectiveness

Aircraft Cost with Pilot

Availability in days

Daily Availability

cost

Yearly Cost

Flight Time Cost

Contract ___, ____ based.

$ $ $

Contract ____, ___ based.

$ $ $

Fleet _____, ____ based.

$ $ $


$ $ $


$ $ $


$ $ $

Contract ____, ____ based

$ $ $


Agency Name

Date Page 17

5 COMPONENT UPGRADE ANALYSIS (IF APPLICABLE)

Include information about any component upgrades that will/may need to be done to the aircraft, and background, as applicable.

5.1 Available Component Alternatives (As Applicable)

Following is a listing of the major component manufacturers and modification centers that have active programs in this area.

- Vendor listing and experience. - Vendor listing and experience.

- Vendor listing and experience.

Include any other alternatives considered, but ruled out, or limitations identified with the alternative chosen.

5.2 Competitor Option X

Include cost information for the alternative at various vendors, and any background or limitations.

5.3 Installation Downtime

Include information on downtime and if this will impact the mission, or how it will be mitigated.

5.4 Conclusions

The conclusion of this part of the analysis is that:

Include summary of findings related to components that should be considered in the analysis, and budget proposal.

6 TWENTY YEAR BUDGET BASELINE

The O&M cost is based on ______. That average, anticipated component upgrade, future engine overhauls inserted into a __% average inflation rate is the basis for the 20 year timeline.

Also include any other cost assumptions that were used in estimating the baseline budget.


Agency Name

Date Page 18

6.1 Component Upgrade costs

Include description and estimated costs of any component upgrade that will/may be needed over the life of the aircraft.

6.2 Operating Financial Assumptions

The following operation and financial assumptions were used for the analysis:

- The program duration ____ years minimum

- Projected service life exceeds ____ years

This estimate is based on the both projected 20__ utilization and the average usage history of the aircraft.

The estimate is based on an average inflation rate of 3% recommended by AMD

6.3 Life Cycle Cost Analysis

The __ year life cycle cost analysis for ______ is shown in following table

OPM 08 Appendix 7

Page 19

6.3.1.1


Agency Name

Date Page 20

%

Operating

Cost

Maintenance

Cost O&M Cost

Engine

Overhaul

/Reserve

funds

Base

Year Table 2 (5 yr Average) O&M Total Due 20xx Target Due 20xx Due 20xx Total Cost

Py-1 YYYY $0 $0

Py YYYY $0 $0

CY Year $0 Year $225,000 Year $163,293 $0

1 20xx $0 20xx #VALUE! 20xx #VALUE! $0







8 20xx $0 20xx #VALUE! 20xx $0


10 20xx $0 20xx 20xx #VALUE! $0











20xx* $0

20xx**

$0 $0 $0 $0

*Component Upgrade in _____ ($_____) and Residual Value ($_____) _____ ($_____) and Residual Value in ____ ($______)

Budget Analysis 20xx-20xx: _____

Total Life Cycle Cost

Other Inflation Rate

Component* / Refurbishment

OPM 08 Appendix 7

Page 21

7 SUMMARY SPENDING PROJECT PHASES

As discussed in the preceding section, the projected service life of the _______ will extend to 20__ and no replacement is planned prior to that time. The ____-year life cycle cost is just over $____ million, including the required planning. This cost includes inflation and a required component upgrade (if applicable) in 20__. The spending summary for this project is summarized in the following table. This table is in the format required by OMB Circular A-11, Part 7 for inclusion in the agency’s Exhibit 300 budgetary submission.

7.1 Table: Summary of Spending for Project Phases

Summary of Spending for Project Phases

(Reported in Millions) Estimates for BY+1 and beyond for planning purposes only and do not represent budget

decisions

PY - PY CY BY BY+1 BY+2 BY+3 BY+4 Total

1 and

20xx 20xx 20xx 20xx 20xx 20xx 20xx beyond

Planning: - - - - - - - - -

Acquisition:

Subtotal Planning & Acquisition - - - - - - - - -

Operations & Maintenance

Total

Government FTE Costs should not be included in the amounts provided above

Government FTE Costs

# of FTE represented by Costs and ___% inflation rate


Agency Name

Date Page 22

8 APPENDICES

8.1 ______ Registry

.

8.2 Aircraft Procurment Documents (If Applicable)

8.3 AMD Financial Documents (If Applicable)

FAA Registry N-Number Inquiry Results

______ is Assigned Aircraft Description

Serial Number Type

Registration

Manufacturer Name Certificate Issue Date

Model Status

Type Aircraft Type Engine

Pending Number Change

Dealer

Date Change Authorized

Mode S Code

MFR Year Fractional

Owner

City State Zip Code

County

Country

Airworthiness

Engine Manufacturer Classification

Engine Model Category

A/W Date


Agency Name

Date Page 23

9 DOCUMENT ACCEPTANCE and RELEASE NOTICE

This is ___(date)____ of the Baseline of NXXXX.

The Exhibit 300 of NXXX is a managed document. For identification of amendments, each page contains a version number. Changes will be issued only as a complete replacement document.

PREPARED: DATE: ___/___/___ (For acceptance) (__________, Document Owner) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD/WT Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], AMD Technical Representative)

ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], Sponsoring Agency ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member) ACCEPTED: DATE: ___/___/___ (For release) ([Name, title], ABOD Member)

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